Long-term care insurance has its rewards but may not be for everyone

She hired a company to help with his home health care. Insurance paid the first few months. Then the reimbursements stopped.

"I spent countless hours on the phone playing the insurance ducking game," Johnson says. "I had to get the state insurance commission involved, send letters, and threaten to sue."

The insurance company restarted payments. "But every time the assigned processor changed, that person would try and find a weasel route or just not pay me for three months and then claim it was because I didn't clarify something," Johnson says. "It was as if they were torturing me."

Gene Johnson died in May 2007, of pneumonia.

"I still had to struggle to get them to pay the last week," Paula Johnson says. "Having a diagnosis from the Mayo Clinic of Alzheimer's should be a slam-dunk, but still I fought and struggled and begged and pleaded and cried to get the claims paid."

James Stephenson of Morristown, Vt., had to step in and fight for his stepmother's long-term care policy claim. She suffered a severe stroke two years ago and has been in a nursing home ever since. At age 99, Stephenson's father couldn't handle all the paperwork for securing payments. Stephenson stepped in and spent six months fighting the insurer for payments.

"I suspect that many companies hope to avoid paying because the insured are too old to go through all the obstacles erected," Stephenson says.

Those in the industry argue that some claims are denied because the consumer doesn't understand a policy's deductible period. Many policies, for example, don't begin to pay until the patient has spent one to three months in a long-term care facility.

Insurers also want to verify that payments will be going to a qualified caregiver, says Jesse Slome, executive director of the American Association for Long-term Care Insurance.

"If you're looking to attack an industry, it's easy to add up all the 'denied' claims," Slome says. "But once the proper paperwork is submitted, most claims are approved."

Rising premiums

Long-term care insurance is essentially a bet with your insurance company over whether you will need long-term care. If you "win" — that is, if you eventually need long-term care — the insurer will pay all or part of the cost. If you "lose," by never needing long-term care, the insurer keeps the premiums. And those premiums can be considerable, especially if you pay over many years.

The odds in a long-term care policy are in the insurer's favor. Most policies are sold to healthy people in their 50s and 60s; most end up never making a claim, or make claims that fall far short of the total premiums they've paid over the years. Those with a high chance of needing long-term care generally can't obtain long-term care insurance.

Jon Lawson, 51, has tried repeatedly to get long-term care insurance coverage. No luck. The Atlanta native has HIV, the virus that can lead to AIDS.

"I have been living with HIV for over 20 years, and I have never been affected by any HIV-related illnesses," he says in an e-mail. "I fully expect to live a long, healthy and productive life. Apparently, the insurance companies will only sell LTC insurance to those they believe will never use it."

Just 7% of all women who are healthy enough to qualify for long-term care policies will need long-term care for more than two years, according to the American Association for Long-term Care Insurance, an industry group. Only 2% of men will need it for more than two years.